Citation Nr: 0511310
Decision Date: 04/21/05 Archive Date: 05/03/05
DOCKET NO. 04-20 415A ) DATE
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On appeal from the
Department of Veterans Affairs (VA) Regional Office (RO)
in St. Petersburg, Florida
THE ISSUE
Entitlement to waiver of recovery of overpayment of
nonservice-connected pension benefits in the calculated
amount of $4,974.00.
REPRESENTATION
Appellant represented by: Disabled American Veterans
WITNESS AT HEARING ON APPEAL
Appellant
ATTORNEY FOR THE BOARD
W. Yates, Counsel
INTRODUCTION
The veteran had active service from January 1952 to November
1953.
This matter comes before the Board of Veterans' Appeals
(hereinafter Board) on appeal from a June 2002 decision of
the RO's Committee on Waivers and Compromises (COWC) which
denied the veteran's request for waiver of recovery of
overpayment of nonservice-connected pension benefits in the
amount of $4,974.
The June 2002 decision was issued by the COWC for the RO in
New York, New York. In December 2002, the veteran's claims
file was transferred to the RO at St. Petersburg, Florida,
based upon his change in residence.
In March 2005, the veteran testified at a Travel Board
hearing before the undersigned Veterans Law Judge designated
by the Chairman of the Board to conduct that hearing pursuant
to 38 U.S.C.A. § 7107(c) (West 2002). A transcript of the
hearing is of record.
FINDINGS OF FACT
1. The veteran was awarded VA nonservice-connected pension
benefits beginning in August 1985 based on his having no
countable annual income. At that time, and on multiple
subsequent occasions, he was informed that the amount of his
pension benefits depended on his income, that he had a duty
to promptly report income changes so that his pension
benefits could be adjusted, and that failure to do so would
result in an overpayment subject to recovery.
2. From February 1, 1998 to December 31, 2001, the veteran
received nonservice-connected pension benefits in an amount
which reflected his prior report that he had no income, yet
during this time he actually had unreported income from his
employment. The VA subsequently learned of this, and
retroactively adjusted his nonservice-connected pension
benefits, resulting in an overpayment debt of $4,974.
3. The $4,974 nonservice-connected pension benefits
overpayment resulted from the veteran's failure to timely
report his earned income, although he was informed he was
required to do so, and he had an intent to seek unfair
advantage with knowledge of the likely consequences.
CONCLUSION OF LAW
Waiver of recovery of an overpayment of nonservice-connected
pension benefits in the amount of $4,974.00 is precluded by
bad faith on the part of the veteran. 38 U.S.C.A. § 5302
(West 2002); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2004).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
I. Factual Background
The veteran served on active duty in the Army from January
1952 to November 1953.
In January 1986, the veteran was awarded nonservice-connected
pension benefits, effective from August 1985. The award
letter noted that it was based, in part, on his having
countable annual income. Included with the award letter was
VA Form 21-8768, Disability Pension Award Attachment, which
further advised the veteran of his rights and
responsibilities regarding the receipt of VA pension
benefits.
In March 1987, the RO sent correspondence to the veteran
indicating that his disability pension award had been amended
based upon the veteran's recently submitted Eligibility
Verification Report. The RO's letter further stated:
Your rate of VA pension is directly
related to your income from other
sources. Your rate of pension must be
reduced whenever you received income from
another source. Therefore, you must
notify us immediately if you have
received any income other than that shown
above or if you receive any additional
income in the future. Failure to inform
the VA promptly of income changes will
result in creation of an overpayment in
your account.
Included with the award letter was VA Form 21-8768,
Disability Pension Award Attachment, which further advised
the veteran of his rights and responsibilities regarding the
receipt of VA pension benefits.
In January 1992, the RO sent correspondence to the veteran
indicating that his disability pension award benefits had
been amended based upon review of his recently submitted
Eligibility Verification Report. The letter stated, "Notify
us immediately if there is any change in your income or net
worth and of any changes in your marital status or the number
of your dependents."
In June 1992, the RO sent correspondence to the veteran
indicating that his disability pension benefits were being
reduced based upon a change in unearned 1989 income reported
by him. The letter noted that the unearned income received
by the veteran in 1989 was considered to be one-time income
and is countable for a period of one year.
In July 1998, the RO sent correspondence to the veteran
informing him of a proposed reduction of his nonservice-
connected pension benefits, effective in September 1, 1998,
based upon information received from the Social Security
Administration that the veteran had started receiving monthly
social security income. This notice was re-sent to the
veteran in September 1998.
In July 2000, the RO informed the veteran that it had
received information from International Total Services, Inc.,
indicating that he had earned income in the amount of $2,693
during 1997. That same month, the veteran submitted a
statement requesting that this overpayment be repaid in the
amount of $20 per month. He also included a W2 statement,
dated in 1997, noting that he had earned income in the amount
of $2,693.02. In October 2000, the veteran was sent notice
of overpayment in the amount of $2,975.
In February 2001, the RO sent correspondence to the veteran
informing him that his income had been reviewed to verify his
entitlement to VA pension benefits. The letter noted that
his income for 1998 did not agree with the income he reported
to the VA for that year. A Statement of Income for Tax Year
1998 noted that the veteran had received self employment
income in the amount of $3,346; income from Western Regional
OTB Corp. in the amount of $826; and income from Florida
Gaming Centers, Inc., in the amount of 1,023.
Notification from the RO, dated in December 2002, noted that
the veteran had received unreported income from other sources
in the amount of $7,888 from February 1, 1998; in the amount
of $12,083 from September 1, 1998; and in the amount of
$6,972 from October 1, 1999.
In January 2002, the RO sent the veteran a notice of
overpayment in the amount of $4,974, along with a Notice of
Rights to Request a Waiver.
In April 2002, the veteran submitted a request for a waiver
of the overpayment in the amount of $4,974. He stated that
the "overpayment was created because I was having trouble
making ends meet and I took a job as a security guard. It
was ignorance on my part because I did not realized that the
extra income would effect my pension, mostly because it did
not effect my Social Security." He indicated that repaying
this debt would create a financial hardship for him. Along
with his statement, the veteran submitted a VA Form 21-5655,
Financial Status Report, showing monthly income of $645 and
total monthly expenses of $700.
In March 2005, a Travel Board hearing was conducted by the
Board at the RO. At the hearing, the veteran testified that
he started working because he was desperate and did not have
enough money to make ends meet. He indicated that he did not
intend to defraud the government at any time. He reported
that he was no longer working, that his current monthly
expenses exceed his current monthly income, and that repaying
this overpayment would case severe financial hardship. He
further testified that his address of record was not properly
updated by the RO. Consequently, he did not receive much of
the mail the RO has sent to him over the years. At the
hearing, he submitted additional evidence consisting of his
bank statements from 1999 through 2002. He also submitted a
waiver of RO consideration of this new evidence.
II. Analysis
The veteran is seeking waiver of recovery of an overpayment
of nonservice-connected pension benefits in the amount of
$4,974.
Initially, the Board notes that the notice and duty-to-assist
provisions of the Veterans Claims Assistance Act of 2000
(VCAA), Pub. L. No. 106-475, 114 Stat. 2096, are inapplicable
to cases involving the waiver of recovery of overpayment
claims. See Lueras v. Principi, 18 Vet. App. 435 (2004); see
also Barger v. Principi, 16 Vet. App. 132 (2002). In regard
to any pre-VCAA duties to notify and assist, the Board notes
that the RO has explained to the veteran the bases for denial
of the claim, and afforded him and his representative
opportunity to present information and evidence in support of
the claim. Significantly, there is no indication that there
is any existing evidence pertinent to the issue on appeal
that has not been obtained. Accordingly, the claim is ready
to be considered on the merits.
The law precludes waiver of recovery of an overpayment or
waiver of collection of any indebtedness where any one of the
following elements is found to exist: 1) fraud; 2)
misrepresentation; or 3) bad faith. 38 U.S.C.A. § 5302. It
should be emphasized that only one of the three elements
(fraud, misrepresentation, or bad faith) need be shown to
preclude consideration of waiver of recovery of overpayment
under 38 U.S.C.A. § 5302(c).
If there is no evidence of fraud, misrepresentation or bad
faith, then a request for a waiver will be adjudicated under
the standard "equity and good conscience." 38 U.S.C.A.
§ 5302; 38 C.F.R. §§ 1.963(a) and 1.965(a). In this regard,
the facts and circumstances in a particular case must be
weighed carefully. Different factors will enter into such
decision, such as the relative fault of the debtor, whether
there was any unjust enrichment, whether there would be undue
financial hardship to recover the overpayment, whether
recovery of the overpayment would defeat the purpose of
benefits otherwise authorized, and whether the debtor
relinquished a valuable right or changed his or her position
by reason of having relied upon an erroneous benefit. 38 C.
F. R. § 1.965(a). Notwithstanding, evidence of fraud,
misrepresentation or bad faith must be considered first.
"Bad faith," according to the applicable regulation,
generally describes unfair or deceptive dealing by one who
seeks to gain thereby at another's expense" and involves
conduct which "although not undertaken with actual
fraudulent intent, is undertaken with intent to seek an
unfair advantage, with knowledge of the likely consequences,
and which results in a loss to the Government. See 38 C.F.R.
§ 1.965(b)(2). Misrepresentation of a material fact must be
more than non-willful or mere inadvertence. 38 C.F.R. §
1.962(b). Under 38 C.F.R. § 3.1(aa), fraud means an
intentional misrepresentation of fact, or the intentional
failure to disclose pertinent facts, for the purpose of
obtaining or retaining, or assisting an individual to obtain
or retain, eligibility for VA benefits, with knowledge that
the misrepresentation or failure to disclose may result in
the erroneous award or retention of such benefits.
A person who is receiving a pension must notify VA of any
material change or expected change in his income or other
circumstances that would affect his or her entitlement to
receive, or the rate of, the benefit being paid. Such notice
must be furnished when the recipient acquires knowledge that
he or she will begin to receive additional income. 38 C.F.R.
§ 3.660.
In this case, a finding that the veteran committed fraud,
misrepresentation of a material fact, or bad faith in
connection with his receipt of VA benefits precludes the
Board from granting a waiver of recovery of the overpayment.
This parallels the "clean hands" doctrine familiar in
equity cases: only if the appellant is free from all taint of
fraud in connection with her claim for benefits may waiver on
account of "equity and good conscience" be considered. See
Farless v. Derwinski, 2 Vet. App. 555 (1992).
A debtor's conduct in connection with a debt arising from
participation in VA benefits/services program exhibits bad
faith if such conduct, although not undertaken with actual
fraudulent intent, is undertaken with intent to seek an
unfair advantage, with knowledge of the likely consequences,
and results in a loss to the government. 38 C.F.R. §
1.965(b); See Richards v. Brown, 9 Vet. App. 255, 257 (1996).
A determination of bad faith is based on the circumstances
that led to the overpayment, and the actions or omissions
with respect to reporting the overpayment, as indicated by
the evidence of record. See East v. Brown, 8 Vet. App. 34,
40 (1995).
In this case, the veteran's request for waiver of recovery of
the overpayment was denied on the basis that he had shown bad
faith in the creation of the debt, a statutory bar to waiver
under 38 U.S.C.A. § 5302(c). See Statement of the Case,
issued in May 2004.
During the March 2005 Travel Board hearing, the veteran
testified that he started working because he was desperate
and did not have enough money to make ends meet. He
indicated that he did not intend to defraud the government at
any time, and did not believe this income would effect his
pension payments.
After having carefully considered the evidence, the Board
finds that the veteran's failure to accurately report his
income (or, in this case, to timely report new income)
suggests an intent to seek an unfair advantage at the expense
of the government or, at best, an absence of an honest
intention to abstain from taking unfair advantage of the
government by either the veteran or his mother. Although the
veteran has testified that he was not aware of his duty to
inform VA of the additional income he was receiving, the
evidence of record contains several instances in which he was
specifically informed of this duty. Moreover, the record
shows that his pension payments had previously been adjusted
on more than one occasion based upon his receipt of
additional income (Social Security income in 1998; unearned
income in 1989).
In short, evidence demonstrates that the $4,974 pension
overpayment resulted from the veteran's failure to timely
report his income, despite the fact that he had been informed
that he was required to do so. His conduct evinces an intent
to seek unfair advantage with knowledge of the likely
consequences. This amounts to bad faith, which is an
absolute bar to waiver. When an absolute bar to waiver is
found, there may be no consideration of general principles of
equity and good conscience, such as any financial hardship in
repaying the debt.
In reaching this decision, the Board has fully considered the
veteran's allegations that the RO failed to properly update
his address of record. Specifically, he submitted a
statement in August 2003 noting that he had lived in
Rochester, New York, from 1989 to 2002, but that the RO
continued to send him mail at his former address in Brooklyn,
New York. Consequently, he claims he failed to receive many
of the notices sent by the RO because his former spouse
neglected to forward his mail to him in a manner, if at all.
A review of the record reveals that the veteran listed his
address in Brooklyn, New York, in documents and statements
submitted in August 1998, October 1998, March 1999, and July
2000. In this regard, the first notice from the veteran
listing a mailing address in Rochester, New York, was the
waiver request at issue in this appeal, received in April
2002. Thereafter, the RO's correspondence was sent to this
new address until the veteran relocated to Florida. Thus,
the Board finds no merit to the veteran's allegation of
impropriety on the part of the RO.
The weight of the evidence establishes that there was bad
faith on the part of the veteran and that this led to the
overpayment of pension benefits. Thus, waiver of recovery of
the overpayment is precluded. As the preponderance of the
evidence
is against the waiver claim, the benefit-of-the-doubt rule
does not apply, and the claim must be denied. 38 U.S.C.A.
§ 5107(b); Gilbert v. Derwinski, 1 Vet. App. 49 (1990).
ORDER
Waiver of recovery of an overpayment of nonservice-connected
pension benefits in the amount of $4,974 is denied.
____________________________________________
JOAQUIN AGUAYO-PERELES
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs